Oil’s weekly gain was trimmed slightly on Friday as investor outlooks on China and the global economy deteriorate. West Texas Intermediate declined to around $88 per barrel as a result of this decline in confidence.
With China’s economic outlook looking gloomy as investors bet that it will take a while to exit its Covid-induced slowdown, a strengthening U.S. dollar is also a cause for concern as commodities priced in the currency become more expensive.
Despite the recent growth slowdown, crude oil remains more than 3% up for the week, with oil at large expected to advance in October, thereby bringing an end to a four-month decline.
Supply over the short-term looks to be on the decline given the decision by members of OPEC+ to cut production in November along with the pending European Union sanctions on Russian oil. In addition, refiners in China have been purchasing of million of barrels in oversupply as they plan to ramp up exports of their own.
Norbert Ruecker, head of economics at Julius Baer, observed that the oil market at large appears to be headed for a cool down, noting that the market is awaiting “announced production curtailments from the petro-nations”, thereby sparking fears of a broader economic slowdown.